Auto Initiative Headed to California Ballot

Now that enough signatures have been gathered statewide to certify the petition to include it on the June 2010 California ballot, the California Continuous Coverage Auto Insurance Discount Act is headed for the ballot for state voters to consider this summer. The initiative needed at least 433,971 valid signatures to be certified by the state for inclusion on the ballot. Proponents of the measure estimate they have signatures well in excess of that minimum. The signatures have been turned in to state officials, and the measure has been approved for inclusion among items for California voters to consider in June.

Insurance Discount Act Basic Facts

The California Continuous Coverage Auto Insurance Discount Act is a piece of legislation designed to augment existing California state auto insurance law in a few significant ways. As its title clearly indicates, the Auto Insurance Discount Act is being framed by its proponents as a discount measure designed to benefit California drivers. In one significant way, its passage would deliver a greater chance for state motorists to earn a discount on their auto insurance premium rates.

Language in the California Continuous Coverage Auto Insurance Discount Act calls for drivers who currently qualify for loyalty discounts under California law to gain greater flexibility to take those discounts with them if they leave their insurer and go with another, provided they maintain continuous coverage throughout the process. These discounts are generally reserved for drivers who maintain continuous coverage with one specific state auto insurance carrier for a minimum period of time, and they usually also require a solid claims history.

Under the terms of the ballot initiative, these loyalty discounts would essentially be reframed as continuous coverage discounts, earned without respect to customer loyalty to one carrier or another. They would give each eligible car insurance consumer the power to switch carriers as desired without fear of repercussion in the way of losing out on these discounts. Current California law prevents drivers from taking these discounts with them, and proponents of the Discount Act are promoting the proposal as a way of rectifying this flaw in the state auto insurance law, in effect since the 1988 passage of California's Proposition 103.

Challenge to Proposition 103

A group organized to promote the measure, Californians for Fair Auto Insurance Rates (CAL-FAIR), says its passage will ensure more choices for auto insurance consumers, as well as stiffer competition among providers who will have no choice but to offer these discounts in an effort to attract new customers and retain existing clientele. They also say it will potentially work to put more insured drivers on the road by giving them another incentive to keep up with their insurance coverage. This incentive is two-sided: on one hand, it rewards drivers who maintain current auto coverage; but in a less well-advertised corollary section of the initiative, it punishes those who do not.

California's Proposition 103 contains language prohibiting auto insurance providers from punishing consumers for previous lapses in coverage by charging them higher rates once they enlist in coverage once more. The so-called Insurance Discount Act negates that provision of Prop 103, thereby allowing state insurance providers to penalize customers who have had a lapse in coverage. Critics of the measure are concerned about this effect of its potential passage. They say that it will actually more than likely increase the rate of California's already troublesome uninsured driver population by giving drivers who can already barely afford coverage another negative factor working against them in terms of pricing.

Individuals who have auto insurance policies in California could potentially be penalized for just missing one payment due to economic circumstances. Even those who do not have a vehicle at all for a time, or who leave the country and then return later, would be included among those for whom this stipulation would apply. For example, military personnel who are sent overseas and remove auto insurance coverage while their vehicles are not in use, then sign back up for coverage once they return home, will lose eligibility for this discount, and will be prone to receive a surcharge laid out by the specifics of the initiative.

The Insurance Discount Act, if passed, would actually require an additional surcharge on the policies of those who have had coverage lapses over the past five years. It does not make any exceptions for groups such as active military or senior citizens. Although the act is being promoted by CAL-FAIR as a discount act providing new ways of saving money for California drivers, it could actually negatively affect more drivers than it helps. The rate increases for those drivers who have already had a lapse in coverage could increase uninsured numbers, potentially pushing California uninsured motorist coverage premiums up and thereby affecting even the drivers who have not ever had a lapse in coverage.

Petition Supported By California Insurer

Californians for Fair Auto Insurance Rates (CAL-FAIR) is the group promoting the Continuous Coverage Auto Insurance Discount Act, but in reality the June 2010 ballot initiative is being pushed by state automotive insurance giant Mercury Insurance, the company funding both CAL-FAIR and the measure itself. In the name of objectivity, it must be pointed out that the Discount Act was put together by an insurer, and also that this type of legislation has been attempted in a few different ways over the years by Mercury Insurance.

The insurance company has poured millions of dollars into the campaign to promote the ballot initiative. This is not to say that the measure is one-sided or that it would not benefit drivers in California; it merely speaks to the intent behind the framers of the initiative. Significantly, it also must be said that CAL-FAIR had very little trouble gathering more than enough signatures from California voters to get the Continuous Coverage Auto Insurance Discount Act added to the June 2010 ballot. The issue has been divisive as different individuals and groups have taken one side or another, either in support of passage of the measure or in favor of its defeat. In order to really take a stand on the issue, observers have to decide who the measure will benefit most, and whether that group constitutes the majority. Some proponents feel that the Act would greatly benefit California drivers who abide by state auto insurance law and play by the rules. They say that giving these drivers more flexibility in their auto insurance choices is a way of rewarding them for keeping the law. But those coming out against the measure tend to dismiss the potential gains as minimal, and even go so far as to suggest they would be outpaced by increased costs indirectly attributable to the surcharges attached to non-compliance.

As with any piece of speculative legislation, it is really impossible to predict the exact ramifications passage of the Continuous Coverage Auto Insurance Discount Act would have for California drivers as a whole. Yet it is clear that those on both sides of the debate surrounding the ballot initiative seem to feel as though they have the interests of the majority at heart. The June ballot in California will be interesting to keep track of.